The Got Gold Report takes aim on the few big bullion banks which it contends have had a trading advantage in gold and silver futures markets and suggests investors take delivery of gold and silver from the COMEX in December to take advantage of the result of the short seller’s actions; artificially low prices. ATLANTA (ResourceInvestor.com) -- A few very large short selling players have had their foot on the necks of all those who would dare to either hold on or try to buy into these distressed markets for all things gold and silver. They have had unchecked power now for months. They have had a great deal of “fun.” But the smartest of them are probably getting “smaller,” as legendary trader and Virginia son Dennis Gartman is wont to say. That is, according to commitments of traders data, the smartest and largest of the short sellers are getting smaller, not larger in their short positioning right now. A few of them are probably turning net long by now or will be by the end of the month as the end of fund tax loss selling arrives on Halloween, five days hence. Indeed, as discussed below for example, the largest of the largest traders of gold and silver futures, the traders classed by the Commodities Futures Trading Commission (CFTC) as commercial on the COMEX, division of NYMEX in New York, are actually now the least net short contracts for silver they have been in years. By November 15, the deadline for most year-end hedge fund redemption notices, another layer of forced selling pressure will have come and gone. Odds and Ends Following up on an item in the last full report, the gold:silver ratio (GSR), which reached a 16-year high two weeks ago of 88 ounces of silver to one ounce of gold, has begun the expected contraction. As of the Friday close the GSR was 78.65 ounces of silver to one ounce of gold using cash market closing figures. The reasoning for conversion of gold into silver while the GSR is so high was discussed in the last Got Gold Report. In other news, the flood of forced or panic sellers into a vacuum of no buyers now has great companies, the greatest mining companies on earth, selling for prices that discount gold to $300 and silver to $4. Talk about a fire sale on the HUI! The action in the world’s major equity markets is getting pretty frightful also. Due to time and travel constraints, we’ll be moving faster than normal in this report, but long time readers of the report won’t want to miss the End Notes section (at the end of this report). It’s time to call a short selling spade exactly what it is. And, perhaps it’s time to do something about it. First, let’s look at a few indicators. Gold ETFs Despite the very real fear of financial Armageddon in the air Friday morning, with Asian markets blood red, the euro cratering and DOW and S&P futures lock limit down pre-open, SPDR Gold Shares, [GLD], the largest gold exchange traded fund, reported a small reduction of 9.8 tonnes over the past week, to 747.06 tonnes of gold bars held by a custodian in London for the trust. So that the price of each share of GLD tracks very closely with the price of 1/10 ounce of gold (less accumulated fees), authorized market participants (AMPs) have to add metal and increase the shares in the trading float when buying pressure strongly outstrips selling pressure. The reverse occurs when selling pressure overwhelms buying pressure. For the year 2008 so far, GLD has added a net 119.18 tonnes of gold bars to its holdings. For context, 119.18 tonnes is about 3.8 million ounces. The gold metal on hand in the COMEX warehouses as of October 23, was reportedly a little over 8.5 million ounces. Thus, so far this year one ETF, GLD, has added the equivalent of 44.7% of all the gold actually held on the COMEX. (No, that’s not a misprint.) Put another way, during 2008, buying pressure for GLD so overwhelmed selling pressure that the authorized market participants had to add just under half the amount of metal that the COMEX (which still more or less sets the price) has to work with in its member’s vaults. What is kind of interesting about that is that if you add up all the contracts that are traded on just the COMEX, all 319,472 of them as of last Tuesday, that amounts to contracts either side, long and short, of 31,947,200 ounces. That means that the COMEX is trading almost 32 million ounces of gold but only has about 8.5 million ounces backing those contracts up. Gold holdings for the U.K. equivalent to GLD, LyxOR Gold Bullion Securities Limited, declined 0.88 tonnes for the week, to 122.64 tonnes of gold held. Barclay’s iShares COMEX Gold Trust [IAU] gold holdings dipped 1.07 tonnes, to 64.52 tonnes of gold held for its investors. For the week ending Friday, 10/24, all of the gold ETFs sponsored by the World Gold Council showed a collective decline of 10.78 tonnes to their gold holdings to 907.8 tonnes worth $20.8 billion. In a world where everyone seems to be selling anything at any price in order to raise U.S. dollars, a reduction of 10.78 tonnes to gold ETF holdings doesn’t quite fit the horrible panic selling model of virtually every other investment class, does it? SLV Metal Holdings Metal holdings for Barclay’s iShares Silver Trust [SLV], also declined a smallish 61.43 tonnes this week to show 6,834.15 tonnes of silver metal held for its investors by custodians in London. That’s almost exactly where it was two weeks ago in the last Got Gold Report. Interestingly, during 2008 buying pressure for SLV so overwhelmed selling pressure the trust has added a total of 68,921,884 ounces (2,143.71 tonnes) of silver to its holdings. And for much of that time the COMEX paper-contract dominated spot market was falling? For comparison, as of Thursday (10/23), the COMEX, division of NYMEX, reportedly held 131,530,256 ounces of silver in its warehouses. That means that during 2008 one ETF, SLV, added the equivalent of 52.4% of all the silver metal that the COMEX has in its vaults. One ETF and in less than one year. Perhaps just as interesting, if we consider all of the 95,873 open contracts for silver on the COMEX as of last Tuesday, then we find that the COMEX traders are trading contracts either side, long and short, of 479.4 million ounces of silver but only have 131.5 million ounces behind it. Let’s see; because of overwhelming buying pressure, during 2008 SLV had to add over half of the amount of silver that all the members of the COMEX have in total inventory, but the COMEX-paper-contract-dominated price of silver metal fell over 50% from its March peak? How can that be? Well, here was the October 7 positioning by the two U.S. banks in the CFTC Bank Participation Report as compared to the entire commercial net short positioning. Exactly two U.S. banks continued to keep their thumb on the COMEX silver market as of October 7 when the silver price had already declined from $19.00 to $11.00 and change in the face of severe physical silver shortages of metal on the street. As of October 7 the two largest commercial banks still held a scandalous 23,308 net short silver contracts when the entire commercial net short position was 29,829 contracts. That’s right, two banks still dominated the small silver futures market with over 78% of all the commercial net short positioning. It is not even fair to call the immoral bank’s position a “net short” position. The two U.S. banks were so certain of their dominance, they were so certain they could drive the futures price of silver lower still, that they did not hold a single long contract for silver on October 7. That, my friends, is the smoking gun and all the DNA we need to see. Who is ever so sure of such a large position? Only those who can control the ball game. No wonder that metal is now flowing out of the COMEX and into the physical market. Over 2 million ounces of silver have fled the vaults of the COMEX in just the last five trading days alone. As we will see a little later, the big U.S. banks have now apparently covered or offset some part, but not yet all of that overwhelming trading advantage over the rest of us. Gold COT Changes In the Tuesday 10/21 commitments of traders report (COT) for gold metal the COMEX large commercials (LCs) collective combined net short positions (LCNS) fell a big 16,950 contracts or 13.48% from 125,743 to 108,793 contracts net short Tuesday to Tuesday as spot (paper contract) gold plunged $63.26 or 7.57% from $835.76 to $772.50. Gold versus the commercial net short positions as of the Tuesday COT cutoff: That’s a big drop in the LCNS, but it was also a big drop in the price of gold metal futures. However, all it did was to raise the premiums for physical metal on the street to the highest levels in years. Then dollar gold plunged again ending the messy week with a last trade of $735.39 on the cash market after briefly testing the low $680s in Friday morning’s panic. Interestingly, gold priced in euro was flat for the week at E581.42. So the big drop in gold was largely a U.S. dollar phenomenon. The chart below compares the COMEX commercial net short position with the total open interest (LCNS:TO).

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